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Hawaii landlords rejecting $8M in overdue rent

Some island landlords have rejected about $8 million in direct payments to cover the rents they’re owed because they do not have general excise tax licenses and are not paying taxes on their rental income.

Where that leaves renters who have qualified and been approved to have their back rent covered through the state’s Rent Relief & Housing Assistance Program is unclear once the current ban on evictions is scheduled to expire at the end of the year.

“We don’t know what happens in January,” said Kent Miyasaki, spokesman for the state Hawaii Housing Finance and Development Corp.

Gavin Thornton, executive director of Hawai‘i Appleseed and a member of the House Select Committee on COVID-19 Economic and Financial Preparedness, told his fellow committee members Monday that the program to cover rents, mortgage payments and homeowner association fees has been “overall, a great success story” — other than the unwillingness of some landlords to accept $8 million in rent they’re due, which can run from about $4,400 to $6,000.

Since the program launched in September, $55.1 million in overdue payments has been approved, and $45 million already has been paid directly to landlords, mortgage lenders or homeowners associations, according to Rent Relief & Housing Assistance Program data.

Of the approximately $10 million gap between what’s been paid and what’s been approved, about $8 million has been declined in the form of direct payments to rental landlords, Thornton said. The remainder of about $2 million is likely because some landlords have yet to provide required documentation for a variety of reasons.

“One of the primary reasons for the gap, as we understand it, is some of the landlords are unwilling to participate in the program, unwilling to sign off to receive the payments — allegedly because they don’t have their GE (general excise tax) licenses,” Thornton told the committee. “They’re not paying their taxes on that rental income. So that’s potentially a problem that could prevent tenants who otherwise are eligible for the program, not receiving those funds that they really need. So we’re hoping very much that those tenants somehow, some way, will ultimately be able to access those resources.”

The program has stopped accepting applications and expires next week.

Thornton told the Honolulu Star-Advertiser that he hopes that an exception can be made in the next few days and that the payments could go directly to renters, although he acknowledged that it would be difficult to change the parameters of the program with little time left.

The rejection of $8 million in direct payments is an unintended consequence of a program that is projected to help 10,542 households remain in their homes.

For an update on a pending application, visit www.hihousinghelp.com.

The program, which is helped by Aloha United Way and Catholic Charities Hawaii, averages $1 million to $1.5 million a day in approvals, Miyasaki said.

Officials involved in the program could not immediately identify how many island landlords have rejected the direct payments they’re owed and on which island their rental units are located.

The typical applicant is approved for about $4,400, Miyasaki said. But Thornton told the House committee that the payments can be as high as $6,000, meaning that’s as much as some landlords could be leaving on the table.

As of Nov. 23 the overwhelming majority of people across the state who have gotten their housing payments covered are renters: 6,392, compared with 401 who received mortgage payment assistance and 49 who got help with their homeowners association fees.

The current moratorium on evictions requires tenants to ultimately pay their overdue rent, mortgage or homeowner’s dues.

If a landlord tries to evict rental tenants who have been approved for the program, Thornton said being approved could conceivably help them.

He suggested that a judge or mediator might be sympathetic to renters who could have gotten their overdue rents covered — but it was their landlords who refused payment because they did not want want their rental operations exposed.

“There are people (renters) who have proven their need for the rental assistance and have done everything they can to get it,” Thornton said.

Applicants must provide proof of economic hardship — such as a layoff, reduction in hours or pay — “as a result of the pandemic,” Miyasaki said.

But renters have few options until their landlords provide their own documents and agree to accept the payments.

“Under the program, we can’t make payment until we get verification from the landlords,” Miyasaki said.

John Fink, president and CEO of Aloha United Way, did not address the issue of landlords refusing payment because they lack GET licenses and don’t pay taxes on their rentals.

In a statement to the Star-Advertiser, Fink wrote: “Many applications are pending payment until an outstanding form, ​that is required, has been received from the tenant’s landlord.

“Each landlord’s situation is unique, so the reasons the forms are outstanding vary. We have received feedback that some landlords have technology access ​problems, language barriers, may be living abroad, and ​there may be other reasons that we simply cannot get a response from some landlords. … Anecdotally, we have heard that some tenants and landlords ​have opted to abandon the application process and negotiate lower rent instead. … We encourage landlords and tenants to work together quickly to keep tenants housed and to keep landlords paid.”

More bad times are ahead for people already struggling without another round of federal aid and a further ban on evictions.

Earlier in the committee meeting, member Carl Bonham — executive director of the University of Hawaii Economic Research Organization — said, “Our economic recovery is at risk, basically.”

Bonham previously had told the committee that a pre-Thanksgiving travel bump would be short-lived.

On Monday, Bonham said Hawaii should prepare for “a tough winter,” economically speaking, in December, January and February.

There are multiple reasons, he said: record-high, surging COVID-19 cases, travel bans, lockdowns and more economic hardship on the mainland, coupled with confusing and frustrating quarantine rules for arriving Hawaii passengers, such as “not knowing if there’s going to be a change from the time you book your flight and your hotel room to when you go to get on your plane.”

Kauai, which has some of the toughest restrictions in the state, had been averaging over 600 arriving passengers per day.

As of Wednesday, Bonham said, the Garden Isle has been averaging just 24 daily arrivals.

BY THE NUMBERS

$8 million

Approximate amount in overdue rental payments that landlords have rejected since September

$4,400 to $6,000

Typical range of housing assistance paid directly to landlords, mortgage lenders and homeowners associations on behalf of households that cannot pay due to COVID-19

6,392

Number of households that have been approved for overdue rental payments as of Nov. 23 through the state’s Rent Relief & Housing Assistance Program

401

Number of homeowners who received mortgage payment assistance since November

49

Number of household that had homeowners association fees paid since November

10,542

Total number of households expected to benefit from the program, which expires next week

Source: Rent Relief & Housing Assistance Program and Hawai‘i Appleseed

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